State insurance regulators have recruited Minnetonka-based Medica to sell health plans in certain parts of Olmsted and Dodge counties after complaints about a lack of competition in the Rochester area.

As early as next week, the options should be available to consumers shopping for individual insurance policies through MNsure, the new health exchange that’s being operated by the state government.

Before Wednesday’s announcement, only one health insurance company sold policies through MNsure to consumers in four ZIP code areas that comprise the city of Rochester, as well as one ZIP code that covers a large portion of Dodge County.

While consumers in the five ZIP codes now have a choice of plans, the options don’t close the gap in MNsure premiums between the Twin Cities and Rochester, where higher premiums reflect high costs charged for services by the Mayo Clinic and other health care providers.

“In the southeast part of the state, the providers carry a lot of clout,” said Danette Coleman, a vice president with Medica. “There are fewer providers, there’s less competition and you see that reflected in the premium rates.”

After the Commerce Department released MNsure premium information on Sept. 6, the Pioneer Press reported that Rochester consumers would pay much higher premiums than consumers elsewhere in the state due in part to the lack of insurance options.

When MNsure’s website went live Oct. 1, it became clear that only one company — Eagan-based Blue Cross and Blue Shield of Minnesota — was offering health exchange plans in the city of Rochester.

At that point, a 40-year-old resident of Rochester could select a Blue Cross plan with a premium of $326 per month, but nothing else through MNsure. A 40-year-old shopping in St. Paul, meanwhile, had a choice of 66 health insurance plans with monthly premiums ranging from $115 to $279.

With the Medica options, a 40-year-old in Rochester will gain seven choices with premiums ranging from $253 to $386 per month.

“Minnesotans, regardless of where they live … deserve choice when purchasing health insurance coverage,” said Mike Rothman, the Commerce Commissioner, in a news release.

The idea of state regulators recruiting competition is questionable, but not unprecedented, said Stephen Parente, a health insurance expert at the University of Minnesota.

“A regulator should not serve the role as market fixer, only market maker,” Parente wrote in an email. “That said, Massachusetts tried this, too, to get more competition (into its exchange) by trying to entice other plans.”

Anne O’Connor, a spokeswoman for the Commerce Department, said the state’s actions were in the public interest.

“The (Commerce) Department has the authority to act in instances of consumer protection,” O’Connor wrote in an email. “Here, the department collaborated with the insurance carriers whose plans and rates had already been approved in the area to find a solution for consumers affected by this situation.”

Minnesota is one of 16 states, plus the District of Columbia, that launched a health insurance exchange as part of the federal Affordable Care Act. The state-based exchanges, as well as a marketplace from the federal government that covers Wisconsin and 33 other states, have shed light on geographic variations in premiums and health costs that have existed for years but were not so apparent to consumers.

Costs can differ for a variety of reasons. Patients might be sicker in some regions and need more care. Doctors in some areas might opt for providing treatments that are more or less expensive. Differences also exist in what health care providers are paid for performing the same service.

Doctors at Olmsted Medical Center in Rochester and the Mayo Clinic receive the highest average payment for performing colonoscopies at $1,488 and $1,311 per procedure at each institution, according to data from Minnesota Community Measures, a Minneapolis-based nonprofit.

The average payment to physicians across the state for performing the test is $596.

Mayo Clinic officials said they are disappointed that more insurance companies didn’t offer plans in the southeast portion of the state. The clinic’s prices are a function of its status as an academic medical center that operates in a rural area, said Bryan Anderson, a clinic spokesman.

“The patients we care for tend to be sicker, and the (federal health law) does not recognize or reimburse for the spectrum of care,” Anderson wrote in an email.

If Rochester patients select the new Medica options, their access to some specialists at Mayo Clinic sites in Rochester will be subject to a special review process, Coleman said, to determine if other doctors could provide the care.

When Medica filed its rates in May for approval by the Commerce Department, the company expected it would be selling products in Rochester, Coleman said. But at some point, the company determined that rules governing the quality of health plan provider networks would prevent Medica from selling products to Rochester consumers.

State regulators contacted the company about three weeks ago, Coleman said, to see if Medica would consider offering products in Rochester. The commissioner of the state Health Department, Dr. Ed Ehlinger, said of the network issue: “We’re comfortable that people, whether they have the Medica products or the Blue Cross Blue Shield product, will have good access to care.”

Wednesday’s announcement is in response to concerns voiced by many in Rochester that individual consumers would have only one choice in health insurance options through MNsure, said Rep. Kim Norton, DFL-Rochester.

In addition, many have voiced concerns that premiums in Rochester are much higher than in the Twin Cities, Norton said, adding that the issue with underlying health care costs remains unresolved.

“My hope is that this transparency will help drive down costs as Olmsted Medical Center and Mayo Clinic look at their rates and know that they have to be competitive,” Norton said.

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